An Economic Analysis of the Dairy Waste Lagoon Clean-out Program in Louisiana

Click on image to view larger version of Figure 1.

LSU AgCenter scientists are conducting research on wastewater treatment technologies at the Southeast Research Station near Franklinton. (Photo by Johnny Morgan)

One project is investigating the value of “floating islands” in the dairy lagoons. The wetland plants prosper on these faux islands by using the nutrients in the lagoon water. Vinicius Moreira, dairy researcher, leads this project. (Photo by John Wozniak)

John Westra, Vinicius R. Moreira and Ronnie Bardwell

Beginning in 1989, one-cell waste lagoons were being constructed on Louisiana dairy farms as new installations or were modified from established two-stage, aerobic and anaerobic cell lagoons using financial assistance from the U.S. Department of Agriculture under the Environmental Quality Incentive Program (EQIP). Building these types of waste installations continued through 2000.

A best management practice (BMP) associated with these installations called for the solids to be removed every four years or so because of the design standards used in their construction. Cleaning out the waste lagoon, however, requires equipment most Louisiana dairy producers do not own. As an alternative, custom cleanout services are available in the region. Unfortunately, the costs exceed most producers’ capacity to pay because of thin profit margins under which most dairy producers operate.

In 2001, funds from the U.S. Environmental Protection Agency and other federal agencies became available through the Lake Pontchartrain Restoration Act for the purpose of improving water quality of the lake. Among other things, this act established the Lake Pontchartrain Basin Foundation, which in turn allocated $100,000 annually to establish a cost-share program for dairy producers in the Louisiana parishes north of Lake Pontchartrain. Under the program, 75 percent of the cost of cleaning out a dairy waste lagoon was covered, and the producer paid the remaining 25 percent of the cost. The number of producers who participated each year was limited by the availability or supply of funds from the foundation.

Funding from this program helped producers maintain functioning dairy waste lagoons and prevented them from becoming inefficient at retaining nutrients on the farming operations. Additionally, this program allowed producers to recycle organic matter and nutrients on their farms by pumping the waste onto pastures and cropland. The consequence of these BMPs was that more nutrients stayed on the land and less ended up in Lake Pontchartrain, improving water quality.

Since 2001, 121 dairy producers have had wastewater from 148 lagoons pumped onto pastures and cropland and incorporated into the soil – 28 lagoons from Washington Parish and 120 from Tangipahoa and St. Helena parishes. The amount of wastewater pumped out of each lagoon varied considerably over the nine-year period, but the average amount removed was 637,416 gallons. There was considerable variation in wastewater nutrient content as well, but on average, it consisted of 4,461 pounds of nitrogen, 2,834 pounds of phosphorus and 1,771 pounds of potash.

One way to analyze the economic benefits and costs of this program is to look at the value of the nutrient content of the wastewater pumped from the lagoons compared with the costs to the producer of pumping out the manure. Such an analysis helps determine the net benefits to the producer and helps determine a minimum value to the producer of pumping the wastewater out of the lagoon merely for its nutrient content. This analysis does not estimate the value to the producer or others in the community of potentially having cleaner water in Lake Pontchartrain because that is a net social benefit enjoyed by all in the community.

The average prices paid by producers for fertilizer in that time period were nitrogen at 44 cents per pound, phosphorus at 40 cents per pound and potassium at 21 cents per pound (all on an elemental basis). After converting the nutrient content of the wastewater to elemental nutrients and using those fertilizer prices, the wastewater pumped out of dairy lagoons had an average nutrient value of $2,090. Figure 1 shows the nutrient value of the wastewater cleaned out of each lagoon varied considerably within a year and between years – ranging from $103 to $11,379.

On the other side the equation, the average total cost for lagoon cleanout was $5,000. The producers’ portion of that cost was $1,250 (25 percent), while the Lake Pontchartrain Basin Foundation’s share was $3,750 (75 percent). Given these conditions, producers, on average, "netted" $840 worth of private benefit in the form of nutrients from this arrangement ($2,090 nutrient value minus $1,250 cost).

Figure 1, however, shows only 82 of the lagoons had a positive net value from nutrients pumped out (more than $1,250 represented by the horizontal axis). The remaining 66 lagoons cost more for the producers to pump out than the value of nutrients applied to their farming operation. So even with financial assistance provided by this program, nearly half of the producers had private costs exceed the private benefits from cleaning out wastewater lagoons.

This last point highlights one aspect of many conservation programs often missed by the public and producers. In many instances, producers are expending private costs to participate in conserva conservation programs that create both private and public benefits. To encourage producer participation, agencies like the USDA and the Lake Pontchartrain Basin Foundation help with financial assistance or cost-share to help defray much of the cost of implementing BMPs. Even with cost-share, however, producers have out-of-pocket expenses associated with those practices often not reimbursed or recovered. Nevertheless, many producers voluntarily implement conservation BMPs in their farming operations, knowing that sometimes the private costs exceed the private benefits but there will be public benefits.

Since October 2008, producer cost-share of this Waste Utilization and Nutrient Management Program has been managed under EQIP through USDA’s Natural Resource Conservation Service field offices in Amite and Franklinton, La. The LSU AgCenter has been a partner with the Lake Pontchartrain Basin Foundation and NRCS to ensure the success of this program by providing educational programs designed to increase dairy producers’ awareness and by facilitating lagoon wastewater and soil sample collection. Southeast Research Station personnel are conducting research on wastewater treatment technologies and are teaching about and promoting BMPs throughout the year.